If you have ever, invested money in the stock market, for a reasonable period of time, you will notice that your investments often increase or reduce in value. This usually occurs per second, hourly or even daily and no one can actually guarantee an investment’s next swing.
Constant changes: Be reminded that cyclical movements in value occur with fundamentally sound investments or otherwise. As a matter of fact, the share price of any blue-chip or big corporation anywhere may fall for any reason, and sustain the fall depending on the periodic news. Anytime there is a large overall movement in the stock market, it is generally known as either a bear or bull market.
Bear markets are when outlooks are generally negative and prices are set to fall, bull markets are the opposite with rising prices and confidence. The good news is that there are investment strategies that work in both markets. Obviously external events not relating to the market may have drastic effect on the stock prices direction.
Some of these events include economic reports, Federal Reserve meetings, company earnings announcements as well as news events could be impactful on the stock market.
By observing the following fundamental lessons about bull and bear markets, you will soon realize which of the markets are right for you:
- Buy Quality Investments: Always ensure that they have been closely examined by a competent person. In fact, this isn’t really the rocket scene. They include the holdings that you must be comfortable to own, as long as there are not any spectacular factors that change in the company. For instance, firms that regain their losses almost immediately after a bear market ends show that they are very robust operations.
- Be calm and maintain reasonable expectations: This advice is more directed to several new investors; because of their lack of relevant knowledge of stock market experience.
- Be aware of your Risk tolerance: Experienced investors usually see a bear market as the time when stocks are generally on sale. They buy because they have basic knowledge about their selected companies. In fact, they do not buy unless they understand the companies to a large extent. Simply remind yourself the amount you can afford even with your goal in sight.
- Principles and Fundamentals: Principles simply comprise of diversification of risk and circumstances in your life. On the other hand, fundamentals give consideration to account for valuation metrics and dividend yields. They assist in determining in the extent of cheapness or cost of a stock. Be informed that expensive stocks fall sharply with speed in any bear market. In anticipation for contingencies, always maintain enough liquidity and cash to cushion any blows. Do not sell during bear market lows because you are short of cash, but wait in order to maximize provision.
- Be patient: Be patient during bull market but more aggressive in bear markets. This is exact opposite to the behaviours of majority of average investors.
Finally, if you are able to know the difference between the bull and bear market, then you will know when to buy or sell and at the end of the day, you will have less risk to loss.